Summary

Raises taxes on very high incomes and directs the revenue to Social Security and Medicare. It expands the wages subject to Social Security tax up to $400,000, creates new 1.2% Medicare surtaxes on very high wages and on self-employment income above specified thresholds, and imposes higher taxes on certain investment income for top earners and for trusts and estates. Implements withholding and collection rules so employers and payers must collect the new Medicare surtaxes, updates cross-references in the tax code, and sets the changes to take effect for taxable years beginning after December 31, 2025 (effective tax year 2026) unless otherwise specified.

Key Points

• Raises the Social Security taxable wage cap so wages up to $400,000 can be subject to Social Security payroll tax.
• Creates a new 1.2% additional Medicare (Hospital Insurance) payroll surtax on very high wages, with employer withholding and collection rules.
• Imposes a parallel 1.2% "further additional" Medicare tax on high self‑employment income and treats that tax as nondeductible.
• Adds a new surtax on certain unearned/investment income for taxpayers and for trusts and estates above income thresholds.

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